Shares of First Republic Bank plunged to a record low on Friday, losing more than half of their value after a CNBC report said the troubled lender would ‘most likely’ be seized by federal regulators.
Stock in the troubled San Francisco-based bank fell as much as 52 percent to $2.98, giving it a market capitalization of less than $620 million. Trading in the bank’s shares was halted more than 20 times due to extreme volatility.
First Republic, the hardest-hit regional lender following two major bank failures last month, has reportedly been in scrambling to reach a private-sector rescue deal in ‘urgent’ government-brokered talks this week.
But on Friday morning, CNBC reported that ‘the most likely outcome for the troubled bank is for the Federal Deposit Insurance Corporation to take it into receivership,’ citing sources who spoke to anchor David Faber.
First Republic told DailyMail.com in a statement: ‘We are engaged in discussions with multiple parties about our strategic options while continuing to serve our clients.’
First Republic has reportedly been in scrambling to reach a private-sector rescue deal in ‘urgent’ government-brokered talks
Shares of First Republic Bank plunged to a record low on Friday, losing more than half of their value after a CNBC report said the troubled lender would ‘most likely’ be seized by the FDIC
The CNBC report did not offer a likely timeline for a potential FDIC seizure of First Republic. Typically, regulators commence bank takeovers at the close of business on a Friday, to allow the weekend for an orderly transition.
Last month, FDIC receivership sealed the fate of Silicon Valley Bank and Signature Bank of New York, in the second- and third-largest bank failures in US history, after a run on deposits left the lenders unable to meet their obligations.
Since then, contagion fears have centered on First Republic Bank, the regional US lender with the largest share of uninsured deposits above the FDIC’s $250,000 limit.
Eleven major US banks banded together in a private-sector rescue deal on March 16, infusing First Republic with $30 billion in deposits.
But the deal has failed to shore up investor confidence, with the bank’s stock down 90 percent since the infusion.
First Republic earlier this week said its deposits had slumped by more than $100 billion in the first quarter.
According to a Reuters report on Friday, US officials are coordinating urgent talks to rescue First Republic, as private-sector efforts led by the bank’s advisers have yet to reach a deal.
The FDIC, the Treasury Department and the Federal Reserve are among government bodies that have started to orchestrate meetings with financial companies about a lifeline for the bank, according to three sources familiar with the matter.
First Republic earlier this week said its deposits had slumped by more than $100 billion in the first quarter. The bank’s CEO Michael J. Roffler is seen above
The government’s involvement was helping bring more parties, including banks and private equity firms, to the negotiating table, one of the sources for the report told Reuters.
Still, concerns remained that deposit declines at First Republic could worsen and spark a fresh meltdown in the US banking industry even as it recovers from the collapse of two regional lenders last month.
On Friday morning, former Treasury Secretary Lawrence Summers criticized federal regulators and US banking giants for the delay in reaching a solution for First Republic.
‘I’m surprised and disappointed that this situation has continued to linger as long as it has, with the bank’s stock down 95 percent’ Summers said on Bloomberg Television’s ‘Wall Street Week’ with David Westin.
‘I hope that between the banks, the FDIC, the other public authorities, that the best way forward will be found within the next week or 10 days.’
Developing story, more to follow.